Timeframe for submitting liquidation’s results and explanations for extended liquidations

In accordance with article 1100-14 of the amended law on commercial companies dated 10 August 1915 (the “Law”), the results of a liquidation proceeding as well as the reasons which have prevented the closing of the liquidation shall be submitted each year by the liquidator to the shareholder(s) of the company (the “Annual Information”).

In case of liquidation of a public limited liability company (société anonyme) lasting for more than a year, the Law also requires liquidation’s accounts to be filed with the Luxembourg trade and companies’ register (RCS) and published with the Luxembourg gazette (RESA).

The wording of article 1100-14 of the Law has not been amended since the adoption of the Law in 1915 and the purpose of this provision is to avoid overly extended liquidation proceedings.

As regards the content and the extent of the Annual Information, the district court of Luxembourg (Tribunal d’arrondissement de Luxembourg siègeant en matière commerciale) ruled on 25 February 1950 that the liquidator has no duty to provide the shareholder(s) with periodic liquidation’s accounts nor periodic reporting as the Law only requires the annual submission of the liquidation’s results and the indication of the reasons which have prevented the closing of the liquidation.

The accuracy of the indications provided by the liquidator to justify a lengthy liquidation proceeding is to be assessed by the shareholder(s). The latter may seek precisions and further justifications either by contacting the liquidator in an informal way or by bringing a legal action in court.

The Law is however unclear on the timing for submitting the Annual Information to the shareholder(s). It is particularly uncertain if the Annual Information is to be interpreted by reference to the calendar year or in consideration of the company’s financial year which, as permitted by law, may not start on 1st of January and end on 31st of December each calendar year.

To the best of our knowledge, these questions have not been clarified by Luxembourg case law.

As it is common practice in case of legal limbo and uncertainty, Luxembourg legal practitioners tend to turn to the legal regime applicable to similar situations in neighboring countries and especially in Belgium as the wording of article 1100-14 of the Law was mainly inspired by the initial version of the provisions of the Belgian law on commercial companies.

Unlike the Grand Duchy of Luxembourg, the Belgian legal framework relating to the submission of liquidation results and explanations to shareholder(s) has slightly evolved over the years and article 2:99 of the Belgian companies and associations’ Code currently indicates that this information shall be provided for each financial year of the company in liquidation.

With respect to the timeframe granted to the liquidator to submit the Annual Information, most Belgian scholars are of the opinion that this shall occur within six months following the end of the company’s financial year if, of course, the liquidation has not been closed since then[1].

This six-month period corresponds to the timeframe granted by law to directors and managers of commercial companies for submitting the annual accounts of the company to its shareholder(s) for approval and Belgian scholars consider that liquidators shall submit liquidation’s results and provide their explanations within the same period.

As the submission of the annual accounts to the shareholder(s) is subject to the same timeline in Luxembourg, it may be appropriate for Luxembourg entities to follow the Belgian position in case of extended liquidation to try to reduce the risk of liability of the liquidator.

For additional information on Luxembourg liquidation proceedings, please feel free to contact our specialists.

[1] See H. DU FAUX, « De la liquidation des sociétés commerciales », Rép. not., t. XII, Droit commercial, Liv. VI, Bruxelles, Larcier, 2003 , pp. 56 et 57, no 20 et p. 137, no 129.